Monday, May 20, 2024

Translating Wall Street Jargon – A Wealth of Common Sense


I saw the following headline earlier this week:

I didn’t even need to read the actual article to know what the message would be. The tell here was the term ‘veteran forecaster’.

In finance-speak, veteran forecaster can be translated to mean someone who is supremely confident in their predictions but almost always wrong.

It has to be this way because forecasters are so unreliable. Yet the financial media loves certainty so they keep bringing them back on again and again. Certainty sells better than nuance.

That’s the game.

There are plenty of other Wall Street terms that have their own translations.

Here are some of my favorites (as translated by the team at A Wealth of Common Sense):

I’m cautiously optimistic.

Translation: I have no idea what’s going to happen.

We’re constructive on the stock market.

Translation: I wanted to say bullish but this is a way to both sound smart and hedge at the same time just in case I’m wrong.

It’s trading at fair value.

Translation: I have no idea what this thing is worth so hopefully the market does.

We’re a boutique investment firm.

Translation: We’re small and don’t manage very much money but we’d like to be bigger. Please give us money.

It’s a proprietary trading system.

Translation: Everyone else on Wall Street uses this same model but calls it something different.

This is a bubble. 

Translation: I’m not invested in that asset that went up a lot.

We’re the smart money.

Translation: We pay ridiculously high fees for “sophisticated” investment products.

You’re being paid to wait in this stock.

Translation: The dividend yield is high for a reason. The stock stinks.

This asset has an asymmetric risk payoff.

Translation: I’ve read The Big Short two-and-a-half times…okay I watched the movie once.

The easy money has been made.

Translation: I didn’t make any of it.

We’ll give you all of the upside without any of the downside.

Translation: This strategy is either going to blow up in spectacular fashion or get smoked during the next bull market.

Sell in May and go away.

Translation: My research process relies exclusively on rhyming. I also buy when prices are high.

Wall Street guru.

Translation: This guy wears a bow tie.

We prefer to gauge performance over a full market cycle.

Translation: We are massively underperforming.

I’m not wrong, just early.

Translation: I’m wrong but don’t think I won’t move the goalposts if I stay wrong.

It’s a Ponzi scheme.

Translation: I disagree with that thing but don’t actually know what a Ponzi scheme really is.

They predicted the 2008 financial crisis. Here’s why they say the next one will be even bigger!

Translation: They also predicted a crisis in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, etc. They got lucky, were “right” once, and have lived off that call ever since.

I’m a contrarian.

Translation: Just like everyone else in finance.

We’re waiting for the dust to settle.

Translation: We get fearful when others are fearful.

Michael and I spoke about Wall Street translations and much more on this week’s Animal Spirits video:



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Further Reading:
Unfortunate Realities of the Investment Business

Now here’s what I’ve been reading lately:

Books:



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